BERLIN: Volkswagen announced on Tuesday that it intends to spend 180 billion euros ($193 billion) over the next five years, including in its North American operations and battery production.
However, the rate of spending will fall from 2025.
The investments come as Volkswagen, the largest automaker in Europe, attempts to catch up to Tesla (TSLA.O), the inventor of the electric vehicle (EV), by increasing its share of the expanding market for battery-powered vehicles. Over two-thirds of the five-year investment budget, up from 56% in a five-year plan it had released a year earlier, is allocated towards electrification and digitalization as it works toward a goal of having EVs account for 50% of its sales globally by 2030.
According to Chief Financial Officer Arno Antlitz, the $2 billion plant for the Scout brand and increased investment in the company’s battery business are the main reasons why the new plan differs from the prior one.
In an effort to boost productivity at its software unit Cariad, the automaker said it is completing high-performance software for its premium and luxury brands that could, in the long term, be used throughout the organization. According to the carmaker’s annual report, which was published on Tuesday, the unit created under former CEO Herbert Diess has gone over budget and fallen behind on its goals, suffering an operating loss of 2.1 billion euros on sales of 800 million euros in 2022.
Volkswagen’s stock was down 3.1% by 09:58 GMT on Tuesday, placing it at the bottom of Frankfurt’s DAX (.GDAXI) index. Jefferies analysts characterized the fourth-quarter results as “weak” after reviewing the complete results.
Revenues for Volkswagen in 2022 were in line with analysts’ estimates, but the company’s fourth-quarter results were negatively impacted by logistics, causing it to miss the average estimate for earnings before interest and taxes by 3%. Up to 15 billion euros are set aside in the most recent investment strategy for battery factories and raw materials.
Thomas Schmall, a board member, stated on Monday that the automaker’s demands in Europe were met by the three plants already under construction and that it was not rushing to choose new locations. The first North American factory, scheduled to begin operations in Canada in 2027, was also announced.
The investment choices are intended to carry out a 10-point strategy created by Oliver Blume, the new CEO of Volkswagen, after he assumed office in September. At a capital markets day on June 21, Volkswagen will present the findings of a training exercise called a “virtual equity story” that Blume had all of the company’s brands, from Audi to Bentley, prepare for.
PowerCo, a battery unit, is the most likely actual stock market candidate. Reuters reported in November that investors were in talks to buy into the division ahead of a possible partial listing. The automaker issued an upbeat outlook for the year ahead this month, sending shares soaring, forecasting a 10% to 15% increase in revenue on 14% higher deliveries despite supply chain challenges.
